Took three tries but beat this on hard (nightmare) level! Posting here because in neither approaches in the strategy guide worked for me.

First, I tried defending the initial keep from green and blue trolls by keeping them at the chokepoint and waiting out the battle between white and orange skeletons and brown trolls and slowly moving towards east. Unfortunately one of the skeletons and some of brown trolls always manage to attack my troops. Next I tried moving as fast as possible to the center and this was even worse because apparently the trolls don't fight each other and I only get surrounded. In my third try, I did a cyclic attack:

1. Recruit couple of thugs and poachers each, then all footpads.
2. Move everyone to the north. Try to reach the red mage with one footpad while the blue trolls focused on poachers and thugs who were easy to inflict damage on.
3. Recruit lot of footpads, and some poachers. Moved two resilient footpads to stay on the castle to the south, to keep the green trolls in check. Did not form a defense line immediately because that meant more units to heal than I had nearby villages, and footpads in castle can take hits from two or three trolls per turn and survive.
4. Recruit lots of thugs. In the north (blue trolls), use poachers to cause damage, thugs to attract trolls. Kept moving thugs back and forth to avoid them getting killed. Once the mage has some breathing space, he can inflict damage to trolls and the poachers can finish the job gaining experience.
5. The blue troll leader is only level 2 with no ranged attack, and he comes out to attack pretty soon. But I couldn't kill him soon because they had a good line of defense. So I just finished the other trolls (mostly level 1), and finally killed the leader as they were down to three or four units. The blue trolls have lot of villages near their keep so use it to heal the units.
6. Meanwhile in the south, I kept a maximum of five units to keep the green trolls in check, and as soon as the white skeletons reached near my keep, I fled with all units to the blue trolls area, filling up that tunnel and leaving the green trolls, white skeletons, and orange skeletons to deal with each other (they were soon joined by the brown trolls, but I didn't even see most the battle because of the shroud. If the green trolls decided to come north I would have been in trouble, but they focused on the skeletons.
7. Once the blue trolls area is cleared, I moved to the east using the trapdoor. The white skeleton leader had most of his troops in the center of the map fighting green and brown trolls, so I faced relatively mild defense. With the mage and some level 2 units, The white skeleton leader could be killed pretty easily. Thugs who dealt damage to skeleton archers and the fire damage from the mage was a big help here.
8. Since I had moved all of my units up the tunnel, there was still a lot of them in the tunnel by the time the white skeleton was killed. At this point I divided the troops, half went down to attack the green trolls (who were now attacking orange skeletons and had left my keep area bare). Other half were further divided into two, most going south and tallin and zlex and a couple of level 1 units to the eastern villages to heal.
9. The green trolls took time to defeat but most of my troops survived and leveled up while attacking them. The orange skeletons were nowhere to be seen. (may be the dwarves were attacking them).
10. The brown trolls came to attack mostly at the center, and Tallin and Zlex's rest stop turned out to be very near the brown troll's keep. By this time my troops and green trolls owned most of the villages so the brown trolls had less units. At which point (like turn 35 or something) that the dwarves made an appearance. I couldn't move Tallin to dwarves keep because he had to get through the brown trolls. With the help of the mage and the dwarves, the brown trolls were too defeated.
11. Once the green trolls in the south were defeated, I moved the troops to east, opened the trap door to find orange skeleton. They were almost all dead because of dwarves and some trolls.
12. In the end, I managed to clear kill the orange skeleton leader with one turn remaining. (44/45 turns).

I think this is very similar to the strategy guide method that suggesting going south to defeat green trolls first, but I found going North more useful because the red mage was there.